Homeownership drive presents bubble hazard
With Hong Kong ranked as the world’s most expensive urban center for seven years in a row, epitomized by its property prices having gone up exponentially by 430 percent since 2004 and outstripping the salary growth of most Hong Kong people, it’s no surprise the city-wide craze for shoe-box-sized cubicles, if not dilapidated subdivided apartments with eye-watering price tags, has taken center stage. In addressing the perennial housing shortage and affordability problems besetting previous administrations of the Hong Kong Special Administrative Region, the emphasis on the housing issue, with several innovative initiatives rolled out in Chief Executive Carrie Lam Cheng Yuet-ngor’s maiden Policy Address, shows our government’s resolve and determination to deal with the issue although such initiatives are not without pitfalls.
In striving to build a “housing ladder to rekindle the hopes of families in different income brackets to become homeowners”, the pilot “Starter Homes” scheme and the government’s plan to convert a rental housing estate in Fo Tan into 4,000 subsidized apartments for sale next year are part of a slate of proposed initiatives that reveal a shift from a rental- to an ownership-oriented housing policy.
Considering the technical difficulty for the government in meeting the target of producing 280,000 public apartments as part of its long-term housing strategy this decade, it’s hoped the latest initiatives will come in handy in trimming the long waiting list for public rental housing by encouraging those who intend to rent apartments to buy subsidized flats, and vacate their public rental apartments for the needy in the long housing queue. The scheme aims to emulate the success of the “Green Form Subsidized HOS (Home Ownership Scheme)” which was launched in 2016, with apartments originally earmarked for rent to public rental housing (PRH) applicants being sold to eligible tenants, resulting in oversubscription with 700 public rental apartments handed back to the Housing Authority. Nevertheless, Lam’s home-ownership philosophy, even seen through rose-tinted glasses, is overshadowed by the proactive role of our government and the questionable effectiveness of the proposed initiatives.
It remains the government’s obligation to meet the needs of the underprivileged who cannot afford a roof over their heads to live dignified lives. However, it’s unfair for our government to treat homeownership as a “need” funded by taxpayers’ money instead of an option in the public’s free hands. A careful line of demarcation on the government’s role has to be drawn between a “gatekeeper” maintaining market fairness and a “player” stepping into the market. Promoting subsidized homes without applying ring-fencing measures will aggravate the housing bubble in the private market, bringing further price hikes from spillover demand for private housing driven by subsidized apartment owners.
As for the scheme and forthcoming HOS projects per se, it is equally questionable if they will entice PRH tenants to “own” subsidized apartments which are subject to the 30 percent premium repayment requirement by the time such apartments can be resold. By linking the hefty premium to the market price at the point of sale instead of the purchase price, it renders full ownership of such subsidized apartments almost impossible in light of current buoyant property prices. As of March 2016, the premiums of 83 percent of subsidized apartments had not been repaid. Moreover, the mortgage rates offered to prospective buyers of subsidized apartments are no more favorable than those for private-sector apartments. It remains doubtful if the more well-off PRH tenants who could afford similarly priced private residential properties would consider the public substitutes, subject to a five-year lock-up restriction and the exorbitant premium payment.
Amid a global inflationary macroeconomic environment, home prices in the private sector are likely to stay flat for some time, keeping needy families on the PRH waiting list and the inadequately housed at bay. It’s commendable that our government has promised to explore temporary housing initiatives targeting those down-andout, including letting industrial building owners convert buildings into transitional housing, and using idle government premises for affordable rental housing. In the long term, our government should spare no effort in increasing land supply, such as relaxing the plot ratios for land development.
In short, there’s no quick fix to Hong Kong’s housing conundrum despite repeated efforts by previous administrations to cool the red-hot property market. As desperate times call for desperate measures, time will tell if Lam’s homeownership policy suite is a bang or a whimper. However, one must acknowledge that homeownership should not be a Hobson’s choice for all, as any initiative to push the public into owning apartments at all costs would make a housing bubble burst more likely, as happened in Hong Kong before. We shall be reminded of wartime British prime minister Winston Churchill’s statement: Those that fail to learn from history are doomed to repeat it.